“In the first quarter of fiscal 2020, our Memory businesses, Specialty Memory Products and Brazil memory performed at or above expectations. In our Specialty Compute business, our two new acquisitions in July 2019 performed as expected, while our high performance computing business, Penguin Computing, experienced worse than expected seasonal weakness. We remain disciplined in managing our operating model and continue to drive improvements across all of our businesses. During the quarter, we meaningfully increased our cash position while reducing our debt. Overall we were able to increase non-GAAP EPS quarter-over-quarter in a difficult memory market,” commented Ajay Shah, Chairman and CEO.

“In Brazil, having completed our first full quarter under the new points-based system for local manufacturing, we are encouraged by the results with units and revenues increasing from the previous quarter,” continued Mr. Shah.

“Looking forward, we continue to see improvement in our Memory related businesses and expect our second quarter to be the low point in this market,” concluded Mr. Shah.

Quarterly Financial Results

GAAP (1)

Non-GAAP (2)

(In millions, except per share amounts)

Q1 FY20

Q4 FY19

Q1 FY19

Q1 FY20

Q4 FY19

Q1 FY19

Net sales

$

272.0

$

278.4

$

393.9

$

272.0

$

278.4

$

393.9

Gross profit

$

54.3

$

52.3

$

85.1

$

55.7

$

53.4

$

85.6

Operating income

$

5.9

$

11.4

$

47.8

$

18.2

$

18.0

$

54.4

Net income

$

0.2

$

5.6

$

31.0

$

13.4

$

11.9

$

40.6

Diluted earnings per share (EPS)

$

0.01

$

0.24

$

1.33

$

0.55

$

0.50

$

1.75

(1) GAAP represents U.S. Generally Accepted Accounting Principles.

(2) Please refer to the “Non-GAAP Information” section and the "Reconciliation of Non-GAAP Financial Measures" tables below for further detail on the non-GAAP financial reporting referenced above and a reconciliation of such measures to our nearest GAAP measures.

Business OutlookThe following statements are based upon management's current expectations for the second quarter of fiscal 2020 ending February 28, 2020. These statements are forward-looking and actual results may differ materially. SMART undertakes no obligation to update these statements.

A replay of the conference call will be available for one week following today’s call through the Events section of the SMART website at www.smartgh.com﻿ or by calling US toll free +1-855-859-2056; Passcode: 4198684.

Forward-Looking StatementsThis release contains, and statements made during the above-referenced conference call will contain "forward-looking statements" including among other things, statements regarding future events and the future financial performance of SMART (including the business outlook for the next fiscal quarter) and statements regarding growth drivers in SMART’s industries and markets. These statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including but not limited to: business and economic conditions and growth trends in the technology industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; trade regulations and relations; changes in currency exchange rates; overall information technology spending; appropriations for government spending; the success of our strategic initiatives including additional investments in new products, additional capacity and acquisitions; the DRAM market and the temporary and volatile nature of pricing trends; deterioration in customer relationships; production or manufacturing difficulties; competitive factors; technological changes; difficulties with or delays in the introduction of new products; slowing or contraction of growth in the memory market in Brazil; reduction in or termination of local content requirements in Brazil; changes to applicable tax regimes or rates; prices for the end products of our customers; fluctuations in material costs and availability; strikes or labor disputes; deterioration in or loss of relations with any of our limited number of key vendors; changes in the availability of supply of materials, components or memory products; the inability of Penguin Computing to obtain and retain security clearances to expand its government business; and other factors and risks detailed in SMART’s filings with the Securities and Exchange Commission. Such factors and risks as outlined above and in such filings may not constitute all factors and risks that could cause actual results of SMART to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. SMART and its subsidiaries operate in a continually changing business environment and new factors emerge from time to time. SMART cannot predict such factors, nor can it assess the impact, if any, from such factors on SMART or its subsidiaries’ results. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results. These forward-looking statements are made as of today, and SMART does not intend, and has no obligation, to update or revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release, except as required by law.

Non-GAAP InformationCertain non-GAAP financial measures are contained in this press release or will be discussed on our conference call, including non-GAAP gross profit, non-GAAP operating income, Adjusted EBITDA, non-GAAP net income, and non-GAAP net income per diluted share. We define Adjusted EBITDA as GAAP net income plus net interest expense, income tax expense, depreciation and amortization expense, share-based compensation expense, acquisition-related expenses, integration expenses and other infrequent or unusual items. Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP and should be viewed as a supplement to, not a substitute for, our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity.

The non-GAAP financial results presented herein exclude share-based compensation expense, intangible amortization expense, acquisition-related expenses and other infrequent or unusual expenses, and with respect to non-GAAP diluted EPS, foreign currency gains (losses). These non-GAAP financial measures are provided to enhance the user's overall understanding of our financial performance. By excluding these charges, as well as any related tax effects, our non-GAAP results provide information to management and investors that is useful in assessing SMART's core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. These non-GAAP financial measures are also used by management to evaluate financial results, to plan and forecast future periods, and to assess performance of certain executives for compensation purposes. The presentation of this additional information is not meant to be a substitute for the corresponding financial measures prepared in accordance with U.S. GAAP. In addition, these measures may not be used similarly by other companies and therefore may not be comparable between companies.

Investors are encouraged to review the “Reconciliation of Non-GAAP Financial Measures to GAAP Results” and “Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA” tables below for more detail on non-GAAP calculations.

About SMART Global HoldingsThe SMART lines of business are leading designers and manufacturers of electronic products focused on memory and computing technology areas. The company specializes in application specific product development and support for customers in enterprise, government and OEM sales channels. Customers rely on SMART as a strategic supplier with top tier customer service, product quality, and technical support with engineering, sales, manufacturing, supply chain and logistics capabilities worldwide. The company targets customers in markets such as communications, storage, networking, mobile, industrial automation, industrial internet of things, government, military, edge computing and high performance computing. SMART operates in three primary product areas: specialty memory products, Brazil products and specialty compute and storage solutions.

Tools

SMART Global Holdings (SGH) is a global leader in specialty memory solutions, serving the electronics industry for over 25 years and holds a leading, international, market position, as measured by revenue, in specialty memory. With the addition of Penguin Computing, SGH has expanded its serviceable markets into areas requiring specialized computing platforms in artificial intelligence and machine learning, advanced modeling and high performance computing.